Olaf Martin, Junwei Hafner-Cai, and Rachel Whittaker
Junwei Hafner-Cai: It’s a portfolio of 60 to 65 equities from around the world, which are well-diversified by sector and region, targeting a tracking error against the MSCI World of 3 to 5%. What sets it apart is that when we construct the initial investment universe, we only include firms with above average gender equality performance. From there, we construct the portfolio according to a more traditional approach, focusing on fundamental analysis and the use of quantitative factors.
Olaf Martin: The strategy’s focus on gender equality naturally generates a portfolio with a bias towards “quality” stocks. Therefore, we tend to invest in companies with high and sustainable return on investment, positive free cash flow generation and strong balance sheets. We avoid industries that we consider to be unsustainable, such as weapons manufacturing, tobacco, alcohol, adult entertainment and gambling. We also avoid any companies with links to child labor.
Rachel Whittaker: Measuring gender equality is more complex than just calculating the proportion of women on the executive board or counting the number of female employees. When we’re assessing a firm’s gender equality practices, we also consider factors such as the type of policies that it puts in place to ensure board diversity, how successful it is at retaining female talent throughout the management chain, and whether it remunerates men and women equally.
We also look at company policies regarding employee satisfaction and work-life balance, such as options for flexible and part-time work in order to accommodate staff who care for children or elderly. That’s because we know that these issues have a disproportionate influence on the likelihood of women remaining in the workforce.
Junwei Hafner-Cai: It’s logical that if companies can keep their best people – whether male or female – then they should have a better chance of outperforming. Gender diversity policies should also reward a company with access to a bigger talent pool, a reputation as a more attractive employer for skilled people, and more motivated employees. And now, there’s some strong evidence to back this up. We’ve been researching this area for years, and we’ve found that a portfolio of companies with high gender equality scores consistently outperforms a portfolio of firms with substandard ones. (http://www.robecosam.com/images/Does_corporate_gender_equality_lead_to_outperformance.pdf)
Olaf Martin: There is clearly scope for an active manager to add value in this area. Gender inequality is still a problem in every industry, despite ongoing work in many countries to promote diversity. This means that there is considerable potential to outperform by identifying and investing in companies that take gender equality seriously.
Rachel Whittaker: Our findings are backed up by a growing body of academic and industry research suggesting that corporate gender equality can have a positive influence on company performance. Let’s consider some figures:
Rachel Whittaker: The RobecoSAM Gender Equality strategy is unique because we know that we have a positive impact through asking questions. Companies participating in our assessment regularly report to us that our assessment helps shape their sustainable business strategy. Since we started asking detailed questions on remuneration and gender representation, we have seen a significant increase in the number of companies reporting both publicly and privately on these metrics. Not only are companies becoming more transparent, they also want to highlight the importance of gender issues to investors, and we believe that what gets measured, gets managed.
Junwei Hafner-Cai: We believe that our proprietary investment process results in a strategy that can have a significant influence on advancing gender equality around the world. The Gender Equality strategy has outperformed its benchmark (MSCI World) by 1.8% in euros since inception in September 2015, while maintaining a similar risk profile.
Furthermore, we also support grassroots initiatives in our local community by supporting networks that promote female representation in businesses and empower professional women in our community, and by organizing events and sharing our research expertise.